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Home values on the way down

Floridians, get ready: The long-feared correction appears to be under way.

Published October 9, 2006

Bracing for a housing hit
Southwest Florida, from Sarasota south to Naples, is especially vulnerable to a “crash” — defined as more than a 10 percent drop — in housing prices. Other parts of the state will also take some hits, forecasts a new report by researchers at Moody’s The declines represent the difference between the recent peak in home prices and the coming troughs. The Tampa Bay market, which suffered less speculative price hikes in recent years, should fare better than some of its metro neighbors to the south.

Housing prices are getting more attention these days than the Iraq war, Florida Republican Rep. Mark Foley’s follies and, heaven forbid, even Bucs QB Chris Simms’ spleen.

Maybe they should. Most Floridians — actually, most Americans — have the vast majority of their personal worth tied up in their homes. So when that value stops growing, starts to look vulnerable or even starts shrinking, people need to turn off the TV and focus.

That’s not easy. The sheer volume and range of housing data, experts’ dire warnings, pro-housing Pollyannas and Realtor hysteria combine for a strange brew and plenty of indigestion.

“Over the last five years, housing values have risen more than 50 percent nationally, outpacing the paychecks of buyers,’’ says Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission. “The housing market is ripe for an adjustment—a year or two of flat or falling prices followed by a period of only modest price gains appears likely.”

At first glance, the latest burst of housing concerns might make even the independently wealthy home handyman queasy:

-- Last week, a new report said the cost of owning a home in Florida rose at nearly twice the national rate over the past five years, consuming an ever larger share of homeowners’ incomes. The Census Bureau said Floridians last year spent 22 cents of every $1 of income on housing, up from 19.6 cents per dollar in 2000. Nationally, Americans spent 20.9 cents per buck last year on housing. Residents in only nine other states spend more, based on income percentage, than wage-challenged Floridians.

Overall, more than a third of all U.S. homeowners with mortgages last year spent 30 percent — the comfort max — or more of their household income on housing costs, including loan payments, real estate taxes, insurance and utilities.

(What didn’t show up in the dated Census figures are the runaway costs in Florida of property insurance, real estate taxes and utilities within the past year. A lot more Floridians now find the formula — housing costs + mortgage + taxes + insurance — pushes them well over the 30 percent comfort zone of income devoted to a home.)

n A recent report released by the National Association of Realtors indicates the median price for existing U.S. homes fell by 1.7 percent in  August from a year ago, the first year-to-year national decline since 1993. Across Florida, the existing-home median price did not drop, but merely flat-lined in August from a year earlier, unchanged at $248,400. Of 20 larger metro markets in Florida, the median sales price of a home in 12 markets dropped (worst: Panama City, down 15 percent) and increased in only eight (best: Ocala, up 14 percent).

n Finally, in what is the most vexing report last week from the well-regarded thinkers at Moody’s, the median house prices in 21 metro markets nationwide are in the midst of what may become double-digit declines (from peak price to the trough price) over the next year or so. Of the top six metro markets nationwide most likely to be hardest hit with drops in housing prices, half are in Florida.

According to analyst Per Gunnar Berglund, any market in the report that faces a drop in housing costs from peak to trough exceeding 10 percent may be heading for a “crash.” Less than 10 percent, he says, constitutes a mere “housing correction.”

The silver lining here is that the Tampa Bay area may be going through its own tough slowdown in housing, but some other parts of the state will be hit much harder.

“Tampa is in the 'correction’ bucket,” Berglund says. Still, it is less vulnerable to price declines than Miami, Fort Lauderdale, West Palm Beach, Orlando or Jacksonville.

According to one particular type of market analysis conducted by, a belt of Gulf Coast metro areas from Sarasota in the north to Naples in the south better brace for some dramatic drops in housing prices. It’s only natural since these are the same speculative-investing, hot-spot cities that enjoyed surreal runups in home prices in the past five years.

Come down to earth, y’all.

Top of the list is Cape Coral, adjacent to Fort Myers, which says may suffer an 18.6 percent drop in home prices from the market’s peak in the fourth quarter of 2005 until things hit bottom in the second quarter of 2007.

Nearby Sarasota may also face some housing trouble, with an expected 14 percent housing price drop from a peak in the fourth quarter of last year to the coming trough in next year’s third quarter. Some other examples appear on the Florida map that appears on the front page of this section.

Nationwide, says, the housing markets most vulnerable to sharp price declines ahead include Reno and Las Vegas, Tucson, Ariz., a bunch of California cities from Stockton to Riverside, as well as places ranging from Greeley, Colo., and Atlantic City to Washington, D.C., and even Detroit. (GM and Ford, take note.)

Analyst Berglund warns that Florida is “highly vulnerable” and says its housing decline is under way. But in the same breath, he adds that Florida’s economy — far hotter than the nation’s — is strong and its population growing. This should allow the state to bounce back more quickly than many other parts of the country.

That’s often the way of Florida. We hurt, then heal quickly. But this nasty combo — a dysfunctional property insurance market and real estate taxes gone wild — may throw us for a loop longer this time around.

When my wife and I hit the local 7-Eleven store late one recent night in search of a Ben & Jerry’s fix, we greeted a neighbor. She wasted no time in telling us her family had had it with the squirrelly economics and hurricane threats of Florida.

While our neighbor kept her tech job in Tampa and her daughter in high school, her husband traveled west to scour parts of Colorado for a better housing market. I wish them well but they may have missed the window of escape. Selling out now could take some time and a painful financial toll. Personally, I hope they stay. Things will get better.

-- Robert Trigaux can be reached at or (727) 893-8405.

[Last modified October 9, 2006, 09:04:22]

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